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Digital economy taxation in Turkey and the Gulf Cooperation Council (GCC)

As of 2017, Turkey’s major efforts to tax the digital economy started with the Virtual Permanent Establishment (PE) audits conducted on nonresident digital companies and continued with the introduction of the new VAT regime on electronically supplied services (ESS) and the new withholding tax on online advertising services. Turkey’s latest measure was the introduction of digital services tax (DST) that gave rise to numerous criticisms due to its broad scope. Esin Attorney Partnership, member firm of Baker McKenzie International, a Swiss Verein, represented two important litigation cases in Turkey, leading to the first court victories regarding the “digital medium” concept in the Turkish DST legislation.


In the GCC, the digital economy is taxed by virtue of the VAT regime that four out of the six countries (the United Arab Emirates, the Kingdom of Saudi Arabia, Bahrain and Oman) have introduced since 2018. Although there are similarities between these countries, the scope of ESS and the interpretation of use and enjoyment is not harmonized. Furthermore, each country has its own rules and practical challenges when it comes to the VAT registration and VAT return process, payment, invoicing and penalties for noncompliance. It is important for businesses to consider this when operating in the GCC.

Source: bakermckenzie.com

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